Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Country Assessment
Malaysia
Cherry-picking in the upcycle
We believe the longer term uptrend for equities is intact.
This should be supported by more positive domestic
newsflow in the coming months. That said, after a stellar
45% gain from the March low, we believe the
benchmark index is vulnerable to a correction in the near
term. We are keen on banks, construction and property
and recommend being selective in stock picks.
On the macro front, we expect to see further strengthening of the economic
recovery with the worst of the financial crisis behind us. Reforms initiated by the
new Prime Minister should continue in the coming months. We believe the
upcoming 2010 Budget will indicate a lower y-o-y deficit on lower operating
expenses while higher development expenditure will help boost the economic
recovery. We foresee a narrower 2.9% GDP contraction in 2009 but a fairly
strong 4.5% rebound in 2010.
In terms of picks, CIMB, Public Bank, AMMB and Hong Leong Bank trade at 13x
forward earnings, relatively undemanding compared to the other index
heavyweights and KLCI’s 15x. We are optimistic that there should be upside for
IJM Corp and Gamuda as the government pump-priming accelerates and
construction contracts are rolled out over the next 12 months. Continued strong
take-ups, margin upside and positive newsflow should lift valuations for property
developers like SP Setia, E&O and DNP. Other picks include Malaysia Airports and
our contrarian Buy on MISC.
Wong Ming Tek (603) 2711 0956 mingtek@hwangdbsvickers.com.my
Malaysia Research Team
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Refer to important disclosures at the end of this report
ed: LM / sa: WMT